SMA Solar, the world’s largest producer of photovoltaic inverters, has said it will have to cut more jobs and warned that it expects tough conditions to carry into this year.
The company, which went public in 2008 at the beginning of the German solar market boom, had already implemented a restructuring program, after falling into the red in 2013. It said it will not be profitable in 2015.
“We expect to see high price pressure on the global photovoltaic market still in the coming years and a further decline in demand in Europe, particularly in Germany,” SMA’s chief executive, Pierre-Pascal Urbon, said in a statement late on Monday.
“In this context, global staff reductions are unfortunately unavoidable,” Mr. Urbon said.
The CEO has to lower costs dramatically to reach an operating profit in the medium term. Erkan Aycicek, Analyst at Landesbank Baden-Württemberg
The company, based in the town of Niesteta near Kassel, wants to cut 1,600 jobs from a total of 4,667 jobs. This is more than one third of all employees. In Germany alone 1,300 jobs will be lost.
The German solar market went down to a production of about 1.9 gigawatt last year from 3.3 gigawatt in 2013, according to the German Solar Industry Association. In 2012, the market was twice as large, reaching 7.6 gigawatt .
On Wednesday morning, SMA shares were down almost 20 percent at €11.93 ($13.55) compared to the close on Monday when the results were announced.
SMA Solar started out as a strong company with profits at €102 million ($115.9 million) in 2012. But changes to Germany’s Renewable Energy Law, or EEG, hit SMA Solar and other renewable energy companies hard.
Until 2013, the German government guaranteed lucrative feed-in-tariffs for solar plants for a period of 20 years, but the government said in 2012 that it would lower the tariffs. As a result, the German solar market, which reached a peak in 2011 and 2012, dropped by over half in 2013 and fell further in 2014.
In addition, increased price competition from Asian solar panel producers has put SMA under pressure. In 2013, the company registered losses for the first time.
To save the company and regain strength, Mr. Urbon sought help from Danfoss, a Danish producer of heating and cooling solutions, which bought a 20 percent stake in SMA Solar last year, becoming the third largest shareholder. Mr. Urbon is mostly interested in Danfoss’s expertise in the field of procurement and production, he said.
Mr. Urbon has also changed SMA’s production methods, switching to a platform-based way of manufacturing, similar to techniques in the auto industry.
“I hope to save tens of millions with those measures,” Mr. Urbon said.
Shareholders want to see results soon. Mr. Urbon is likely to present a new plan on Friday at its investor day at the company’s headquarters.
“Mr. Urbon is under a lot of pressure,” said Erkan Aycicek, an analyst at Landesbank Baden-Württemberg. “He has to lower costs dramatically to reach an operating profit in the medium term.”
Georg Weishaupt covers the building sector, solar and wind energy for Handelsblatt. Franziska Scheven is an editor with Handelsblatt Global Edition and contributed reporting to this story. To contact the author: [email protected]